ACCA warns property buyers

As property prices continue to soar, new borrowers are being encouraged into the market by the lowest interest rate of 5.75% – the lowest for 40 years.

The warning follows the problems housbuyers faced during the recession of the early 1990s, when millions of people faced interest rates of up to 15%.

Following the slump in property values at that time, many risked losing their homes because of negative equity and re-possessions reached record levels.

John Davies, head of business Law at ACCA, said: ‘People who are considering taking on a mortgage at this time, particularly one which stretches their resources to the limit, should think carefully about whether they could cope with any significant rise in interest rates in the future.

‘Lenders are currently offering mortgages of up to 3.5 times their salary and, with prices and interest rates at their current levels, many are understandably tempted to borrow to the hilt.

But, he added: ‘With the manufacturing sector already in recession, the continued buoyancy of other sectors of the economy and, in particular, of the property market cannot be taken for granted.

‘Home buyers should consider carefully the implications for themselves of any economic downturn before committing to a long-term loan whose term will outlive the boom conditions of the past few years,’ he added.

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